Bond investors may face losses if India is not included in JP Morgan's emerging markets debt index

16 Sep 2022 , 07:07 AM

Indian bonds are receiving a flood of foreign investment, placing the instruments in danger of losses if a long-awaited inclusion into international indexes is once again delayed.

The value of bonds bought by international funds using the so-called Fully Accessible Route in August increased to Rs4,200 crore ($529 million), the highest amount since January. In September, they already purchased more securities for Rs3,100 crore.

Optimism that JPMorgan Chase & Co. may announce the inclusion of Indian debt in its emerging-markets index as early as this month’s middle has fuelled a bond rally that has led to foreign capital inflows.

The benchmark 10-year yields in India have decreased by around 50 basis points from their peak of 7.62% in June to Wednesday’s close of 7.12%. In comparison, since the end of that month, US Treasury yields of a similar duration increased by nearly 40 basis points.

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